Do You Pay Tax on Equity Release?

Is Equity Release Taxable?

The short answer is no, there’s no direct tax to pay on the money you receive from an Equity Release plan.

Capital gains tax is due when you sell most assets and make a capital gain above the annual capital gains tax threshold. However, with an Equity Release Mortgage you’re borrowing money against your home, so there’s been no capital gain.

Equity Release Mortgages are therefore not liable for capital gains tax.

Note that Equity Release will reduce the value of your estate and could impact your entitlement to certain means-tested benefits.

What about downsizing?

There’s an exemption on any gains you make on the sale of your main residence, known as private residence relief.

This means, if you wanted, you can also typically sell your entire home on the open market and downsize to release equity rather than using an Equity Release provider. This does not usually attract capital gains tax.

The capital gains tax exemption applies in full providing:

• You’ve lived in the property as your main home for all the time you’ve owned it
• You haven’t let part of it out (this doesn’t include having a single lodger)
• You haven’t used part of it for business only
• The grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
• You didn’t buy it just to make a gain.